Changes from plenary report to adopted text

Removed(i) the introductory phrase is replaced by the following:

Removed‘1. Management companies, which intend to delegate to third parties the task of carrying out, on their behalf, one or more of the functions listed in Annex II and the services referred to in Article 6(3), shall notify the competent authorities of their home Member State before the delegation arrangements become effective. The following conditions shall be met:’;

Removed(ii) point (b) is replaced by the following:

Removed‘(b) the mandate must not prevent the effectiveness of supervision over the management company, and, in particular, must not prevent the management company from acting, or the UCITS from being managed, in the best interests of its investors and clients.’;

Removed(iii) points (g), (h) and (i) are replaced by the following:

Removed‘(g) the mandate must not prevent the persons who conduct the business of the management company from giving further instructions to the undertaking to which functions or provision of services are delegated at any time or from withdrawing the mandate with immediate effect when this is in the interest of investors and clients.

Removed(h) having regard to the nature of the functions and provision of services to be delegated, the undertaking to which functions or provision of services will be delegated must be qualified and capable of undertaking the functions or performing the services in question; and

Removed(i) the UCITS’ prospectuses must list the services and functions which the management company has been allowed to delegate in accordance with this Article;’;

Removed(iv) the following point (j) is added:

Removed‘(j) the management company must be able to justify its entire delegation structure on objective reasons.’;

Removed(b) paragraph 2 is replaced by the following:

Removed‘2. The liability of the management company or the depositary shall not be affected by delegation to third parties of any functions or of provision of services by the management company. The management company shall not delegate its functions or provision of services to the extent that, in essence, it can no longer be considered to be the manager of the UCITS and to the extent that it becomes a letter-box entity.

Removed(ba) the following paragraphs are inserted:

Removed‘2a. By way of derogation from paragraphs 1 and 2, where the marketing function, as referred to in the third indent of Annex II, is performed by one or several distributors which are acting on their own behalf and which market the UCITS under Directive 2014/65/EU or through insurance-based investment products in accordance with Directive 2016/97/EU, such function shall not be considered to be a delegation that is subject to the requirements set out in paragraphs 1 and 2, irrespective of any distribution agreement between the management company and the distributor.

Removed2b. The management company shall ensure that the management of funds for which it is the management company complies with the requirements set out in this Directive. That obligation applies irrespective of the regulatory status or location of any delegate or subdelegate.’;

Removed(c) the following paragraphs 3, 4, 5 and 6 are added:

Removed3. ▌

Removed4. ▌

Removed5. By … [24 months after the date of application of this amending Directive] ESMA shall provide the European Parliament, the Council and the Commission with a ▌report ▌ analysing market practices regarding delegation to entities ▌and compliance with Articles 7 and 13.

Removed6. The Commission shall adopt, by means of delegated acts in accordance with Article 112a, measures specifying:

Removed(a) the conditions for fulfilling the requirements set out in paragraph 1;

Removed(b) the conditions under which the management company of UCITS shall be deemed to have delegated its functions to the extent that it becomes a letter-box entity and can no longer be considered to be the manager of the UCITS as set out in paragraph 2.’;

Removed(3a) Article 14 is amended as follows:

Removed(a) in paragraph 1, point (a) is replaced by the following:

Removed‘(a) acts honestly and fairly in conducting its business activities in the best interests of the UCITS it manages and the integrity of the market in particular as regards fees and costs charged to investors;’;

Removed(b) the following paragraphs are inserted:

Removed‘2a. For the purposes of point (a) of paragraph 1, ESMA shall by ... [18 months after the entry into force of this amending Directive] submit a report to the European Parliament, the Council and the Commission:

Removed- assessing the costs charged by management companies to investors in UCITS, and the reasons for cost levels and for differences between them;

Removed- proposing criteria for assessing whether the level of such costs is appropriate, in particular when compared to the level of costs in other jurisdictions worldwide;

Removed- proposing, if needed, options for action by competent authorities or by legislators in respect of inappropriate or undue levels of such costs.

RemovedThe report shall assess the potential impact of each such option.

RemovedThat report may be combined with the report required in accordance with Article 12(3a) [AIFMD].

RemovedCompetent Authorities shall have the power to require, on a one time basis, information from UCITS management companies on costs insofar as that is needed for the purpose of that report. The competent authorities shall avoid duplication with existing reporting obligations.

RemovedCompetent authorities shall provide data to ESMA to contribute to that report by ... [X months before the date specified in the first subparagraph].

Removed2b. In the light of the report referred to in paragraph 2a, and without prejudice to other legislative or regulatory options including Commission proposals to revise this Directive or ESMA guidelines, ESMA may develop draft regulatory technical standards to specify:

Removed(a) criteria for the assessment by competent authorities whether the level of costs charged by management companies to investors in UCITS is appropriate;

Removed(b) actions that those authorities should take in respect of inappropriate or undue levels of such costs.

RemovedPower is conferred on the Commission to adopt the regulatory technical standards referred to in this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;

Removed(c) the following paragraphs are added:

Removed‘3a. Where a management company intends to manage a UCITS on behalf of a third party, including but not limited to under a mandate in accordance with Article 6(3)(a) or under a delegation in accordance with Article 13, and where the third party is to have significant control over the UCITS’ design, distribution and management, the management company shall employ heightened scrutiny of the potential for conflicts of interest. The management company engaging in such a relationship shall submit to the competent authorities of its home Member State detailed explanations and evidence on their compliance with paragraphs 1 and 2. In particular, it shall specify how they prevent systematic conflicts of interest or any other material conflicts of interest arising from the relationship, how any existing or potential conflicts are effectively managed in the best interest of investors and how this is clearly and comprehensively disclosed to investors.

Removed3b. In order to ensure uniform conditions of application of this Article, ESMA shall develop draft regulatory technical standards to specify:

Removed(a) the types of relationship between the management company and a third party when the management company manages a UCITS on behalf of the third party and of conflicts of interest as referred to in paragraph 3a;

Removed(b) criteria to be used by the relevant competent authorities to assess whether UCITS comply with their obligations under paragraph 3a.

RemovedPower is conferred on the Commission to adopt the regulatory technical standards referred to in this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;

Removed(4) the following Article 18a is inserted:

Removed‘Article 18a

Removed1. Member States shall ensure that at least the liquidity management tools set out in Annex IIA are available to UCITS.

Removed2. After assessing the suitability in relation to the pursued investment strategy, the liquidity profile and the redemption policy, a management company shall select at least one appropriate liquidity management tool from the list set out in Annex IIA, points 2 to 7, and include in the fund rules or the instruments of incorporation of the investment company for possible use in the interest of the UCITS’ investors. Subject to Article 84, this shall not prevent a UCITS from using other tools from Annex IIA, points 2 to 8. The management company shall implement detailed policies and procedures for the activation and deactivation of any selected liquidity management tool and the operational and administrative arrangements for the use of such tool.

RemovedBy way of derogation from the first subparagraph, a management company may select only one liquidity management tool from Annex IIA, points 2 to 7, for a UCITS that it manages, if that UCITS is authorised as money market fund in accordance with Regulation (EU) 2017/1131.

Removed3. ESMA shall develop ▌guidelines to▌ specify best practice as regards the characteristics of the liquidity management tools set out in Annex IIA.

Removed4. By ... [12 months after the entry into force of this amending Directive] ESMA shall develop draft regulatory technical standards on the disclosure to competent authorities and investors of information related to the selection and calibration of ▌liquidity management tools by the management companies for liquidity risk management ▌and for mitigating financial stability risks. Those standards shall recognise international standards for liquidity risk management for collective investment schemes from February 2018 and that the primary responsibility for liquidity risk management, including the selection and use of liquidity management tools, remains with the management company. They shall allow adequate time for adaptation before they apply, in particular for existing UCITS.

Removed5. Power is delegated to the Commission to adopt the regulatory technical standards referred to in paragraph▌ 4 in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;

Removed(5) the following Articles 20a and 20b are inserted:

Removed‘Article 20a

Removed1. A management company shall regularly report to the competent authorities of its home Member State on the markets and instruments in which it trades on behalf of the UCITS it manages. It shall provide the information on the assets and liabilities of investment funds which the company reports to their national central banks under Regulation (EU) No 1073/2013 of the European Central Bank as well as information on the instruments in which it is trading, on markets of which it is a member or where it actively trades, and on the exposures of each of the UCITS it manages.

Removed1a. A management company shall regularly report to the competent authorities of its home Member State the following information regarding delegation arrangements concerning portfolio management or risk management functions and in particular with respect to each UCITS managed or marketed in the Union:

Removed(i) information on the entities to which such functions have been delegated, namely the name and relevant legal identifier of each delegate, its jurisdiction of establishment and, where relevant, its supervisory authority;

Removed(ii) for each of the following, a description of the human and technical resources:

Removed- employed by or committed to the management company for performing day-to-day portfolio or risk management tasks within the management company;

Removed- employed by or committed to the delegate for performing those services on a delegated basis; and